The chief executive of a company may be liable to a contracting party for false statements made during negotiations on behalf of the company, according to a federal district court in New York.

In the case "internationally renowned artist" Donald Sultan agreed with Park Plaza Worldwide LLC, to help design a new luxury hotel in Budapest. Under the deal, Sultan was to get a fee of something over $1 million, plus five percent of the hotel’s profits. PPW’s president, Read, represented that he had authority to enter this agreement. After Sultan learned that PPW, which had paid his fee, had no power to give him the profits, he sued. Read moved to dismiss, arguing that the claim was a simple breach of contract against PPW.

Denying the motion, Judge Peter Leisure of the Southern District of New York held that Read’s representations as to his and PPW’s authority were false and material statements of fact. The court rejected the argument that Sultan was dealing with PPW, not Read personally, finding that it was Read’s representations that were relied on for the cause of action.